The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.

Italy&#x2019;s system of social protection has come under criticism for being fragmented and excessively skewed toward pensioners and &#x201C;insiders.&#x201D; After setting up a consolidated presentation of the social security accounts, this paper provides an empirical assessment of the effectiveness of the welfare system, relying on a survey of households&#x2019; incomes and wealth. It concludes that, owing to ill-designed targeting mechanisms, less than a quarter of total spending on the welfare instruments under review accrues to families whose own resources fall short of the poverty line. The paper then proposes a new means-testing formula.